Sheet2 - Balance-of-trade equilibrium: export>import...

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Balance-of-trade equilibrium: export>import gold inflow money supply increase price inflation export decreases export=import Bretton Woods system(fixed ex. Rates): Dollar=central currency. Other currencies revalue dollar devalues. W/ permission of IMF ex. Rate devaluation. Failed due to speculative pressure on dollar from increased US inflation&balance-of-trade deficit. Create IMF&World Bank(promote general economic development). Start a system of fixed ex. rate under IMF fix currency in term of gold,but not required to ex. for gold. Bureaucratic control: control thru a sys of rules and procedures that direct the actions of subunits. a) budget, b) capital spending rule(need to get approval for any capital expenditure by a subunit exceeds a certain amount) Capital flight: domestic currency depreciates b/c hyperinflation or enormous amount of domestic currency conversion to foreign Capital market loans(to corp.): equity or debt loans. Capital market: gather ppl who want to invest &borrow. Global capital market: a) greater supply of fund lower cost of capitals(rate of return) for borrower, b) allows investor to diversify portfolios of holdings reduce risk(movement of stock price are not globally correlated), c) recent yrs, grew by advances in IT(reduce cost of recording, transmitting, processing info.), deregulation of financial service, relaxation of regulation governing capital flows(b/c of development of Centralization: a) help facilitate coordination, b) help ensure decisions are consistent w/ organizational obj., c) give top- level managers the means to bring major organizational change, d) avoid duplication of activities to occur under subunits. Commercial bank: indirect connection function. Make profit Common currency(benefit): a) reduce exchange cost, b) easier to compare increase competition, c)increase economic efficiency, d) development of capital market increase range of investment options Common currency(cost): a) lost control over monetary policy, b) unleash enormous pressures for tax harmonization and fiscal transfers from the center Common market: similar to a customs union, but allows factors of production to move freely b/w countries. e.g. MERCOSUR Control sys(cost): amount of time top management must devote to monitoring and evaluating subunit’s performance. Control sys: metrics used to measure the performance of subunit & make judgment about how well manager are running the subunit. a) personal control, b) bureaucratic control, c) output control, d) cultural controls Convertibility: freely convertible=can be converted by residents and nonresidents. Externally convertible=only nonresident can convert Coordination(impediment): a) inhibit communication b/w managers, b) subunits’ orientation may be different Cost reductions(Pressure for~): requires a firm to lower the costs of value creation by mass producing a standardized
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This test prep was uploaded on 04/22/2008 for the course IBUS 211 taught by Professor Ullmann during the Spring '07 term at Binghamton University.

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Sheet2 - Balance-of-trade equilibrium: export>import...

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